Greater New Orleans

In this Aug. 24, 2010 file photo, R. Allen Stanford arrives in custody at the federal courthouse for a hearing in Houston. He was convicted of bilking investors out of more than $7 billion over 20 years as part of a massive Ponzi scheme.
(David J. Phillip, The Associated Press)

WASHINGTON -- Victims of Allen Stanford's Ponzi scheme won't be able to get compensation for their losses from the Securities Investor Protection Corp. (SIPC), an appeals court ruled Friday.

The Securities and Exchange Commission had sought a court order forcing the SIPC to reverse an earlier decision denying compensation to victims of what the government said was one of the largest financial frauds in U.S. history. The corporation was created by Congress to use funds provided by financial services companies to compensate victims of financial fraud.

Stanford, who operated a Texas-based investment firm, was sentenced in 2012 to 110 years in prison for bilking thousands of investors, including many in Baton Rouge, with fraudulent certificates of certificate from a foreign bank. He lured investors with promises of significantly higher interest payments than provided by U.S. banks and financial companies.

It was all part of giant Ponzi scheme, federal prosecutors said.

Washington D.C. Appeals Judge Sri Srinivasan said that a district federal court, which had also refused to order compensation for the Stanford victims, was "truly sympathetic to the plight of the victims."

"We fully agree," the judge wrote. "But we also agree with the district court's conclusion."

The district court said it could find no fault with the SIPC's finding that it could not order compensation to victims. It said that Stanford was a SPIC member, but the losses were suffered from fraudulent investments with a foreign bank that wasn't a member.

Sen. David Vitter, R-La., who has been arguing for compensation for victims, many of whom are his constituents, was disappointed by the Appellate Court ruling. He urged the Securities and Exchange Commission to appeal.

The commission, which a spokesman said is reviewing its options, can either appeal directly to the Supreme Court, or ask for a hearing before the entire Washington D.C. appellate court.

Vitter said he hopes the ruling will prod the Obama administration to appoint members to the SIPC who are committed to protecting investors.

"The organization was created and tasked with the sole purpose of protecting investors and victims of fraud," Vitter said. "The previous chairs of the board were only interested in protecting Wall Street, but the president has an opportunity to fix that now with new nominees."